Xi Jinping’s "new era"

The declaration of a "new era" by the president, Xi Jinping, shows that he aims, not just to serve as president for a couple of terms, but to oversee a change in approach for decades to come in a manner that bears comparison with the Mao Zedong and Deng Xiaoping eras. A line has been drawn under the approximately 40-year-long period of economic reform in a US-led global economy ushered in by Mr Deng in the late 1970s. Financial reforms and supply-side reforms will be pursued, but the aim is for China to emerge from the US-led system and become a centre of global political, economic and military power in its own right.

The 19th national congress of the Chinese Communist Party (CCP), which closed on October 24th, will be looked back upon as one of the most important in the ruling party's history. The meeting confirmed Mr Xi's pre-eminence by writing his theoretical contribution to the party's ideology, dubbed "Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era" (or "Xi Jinping Thought"), into the party's constitution. As an eponymous ideology, it gives Mr Xi status comparable with the two other "paramount" CCP leaders, Mao Zedong and Deng Xiaoping.

As such, media speculation whether Mr Xi will attempt to stay in power longer than the normal ten years may be irrelevant: as a transformative leader of a whole era, he is set to dominate the CCP for years to come. Whereas the leaders who succeeded Mr Deng, Jiang Zemin and then Hu Jintao, operated within the parameters of the agenda set by Mr Deng, Mr Xi is clearly attempting to demarcate himself from that period and establish an ideological approach that will determine China's destiny for decades to come.

A new development target

The "new era", as defined by Mr Xi, is characterised by the "principal contradiction" facing Chinese society "between unbalanced and inadequate development and the people's ever-growing needs for a better life". Mr Xi's language thus updated the definition that the CCP had previously used in its theoretical textbooks, which highlighted the contradiction between "the ever-growing material and cultural needs of the people and backward social production".

Such Marxist terminology may be alien to outside observers, but nevertheless has important policy implications. It suggests that the authorities are set to move away from the type of GDP targeting they had favoured in the past to drive higher levels of "social production". Instead, the nod to a "better life" implies a focus on issues such as environmental sustainability, welfare provision and wealth inequality.

This was apparent elsewhere in Mr Xi's speech. He reasserted the goal of building a "moderately prosperous society" by the 100th anniversary of the founding of the CCP in 2021, a target that he inherited and which is defined primarily in GDP terms (a doubling of the 2010 real GDP level by 2020). However, Mr Xi also set out a new goal of delivering "basic socialist modernisation" by 2035 and, in this case, refrained from attaching a GDP target. This new goal comes mid-way between the 2021 target and the (also pre-existing) goal of building a "modern socialist country" by 2049, when the People's Republic of China will mark 100 years since its establishment.

An effort to tackle wealth inequality seriously would be interesting. As we highlighted in our recent article on the subject, wealth inequality has widened dramatically in recent years, mainly owing to the rapid rise in property prices. More aggressive redistribution policies could include higher personal income taxes, the introduction of a nationwide property ownership tax and taxes on estate inheritance. However, such policies would probably run into opposition from segments of the middle-class population as well as business and CCP elites.

The other economic messages in Mr Xi's speech were ones of continuity. He re-emphasised the corporate deleveraging agenda, as did the governor of the People's Bank of China (the central bank), Zhou Xiaochuan, who warned about the risk of China facing a "Minsky moment" on the sidelines of the congress. Supply-side structural reforms in the industrial sector will continue. Mr Xi also stated that state-owned industry was to be strengthened—and to that extent, economic liberalisation will have its limits—but that a priority will be to complete interest-rate and exchange-rate liberalisation, a welcome commitment given recent backsliding in these areas.

Mr Xi warned that achieving his development goals would not be "a walk in the park". However, stepping away from explicit GDP targeting (at least after 2020) gives the government greater room for manoeuvring in policy terms. In effect, Mr Xi is outlining a period when tough but necessary decisions will be made, but with the visionary promise of developed, upper-middle-income country status at the end of it.

Domestic political hardline

Although China became freer in many ways during the Deng era, without introducing Western-style democracy, Mr Xi's presidency has seen a considerable tightening of control on civil society. An important part of Xi Jinping Thought is the key role that a reinvigorated one-party state will play in guiding the Chinese nation. Mr Xi stated that there would be no mechanical copying of foreign political systems, and rejected the idea that there is a single model for political development.

In his speech, he claimed that "the party exercises overall leadership over all areas of endeavour in every part of the country", signalling stepped-up state control in every sphere. The Ministry of Education has indicated that Xi Jinping Thought will now be on the curriculum in all schools. It follows, therefore, that democratic reforms have been ruled out, not just for Mr Xi's next term, but for decades to come. The party's anti-corruption campaign will be maintained, as part of a long-term approach to dealing with a key threat to the party's survivability in power.

There is a key domestic political risk in such a hardline approach, in that Mr Xi has taken personal responsibility for the implementation of policies designed to forge a "new era". However, by the same token the party's stance against civil society is designed to nip in the bud the emergence of any rival force that could galvanise any discontent produced by a slowdown in GDP growth and hardline social and cultural policies. This approach significantly bucks Western assumptions that economic and political modernisation go hand in hand.

Global ambition

In his congress speech, Mr Xi rejected international political isolation, as seen in the Mao era, noting that no one country can deal with global challenges. Instead, he offered a confident vision of China's global rise and, in contrast to his predecessors, was not reserved about masking the scale of his ambitions. China will "move to centre stage and make greater contributions to mankind", Mr Xi noted, perhaps implying that he views China's own political model as a model for the development of other countries.

A greater contribution by China to global policy challenges will be welcomed by many, but others will have concern about the nationalist sentiment that appears to underline Mr Xi's vision. Although Mr Xi claimed that China would never seek hegemony, he specifically called for China to become a world-class military power by 2050. That commitment will raise concerns about the scope of China's offensive military capabilities.

In effect, Mr Xi's "new era" is then not just one where China will be working through a restructuring of the drivers of economic growth to lay the foundations to becoming a pre-eminent global economic power, but one where the entire globe could also be working through the consequences of the relative decline of US power and cultural influence. While anti-globalisation sentiment emerges in the West, China appears to be saying that there will still be globalisation, but not the globalisation that the US and its Western allies were envisaging.